Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (01-16-09 03:16 AM)

US Gold Corp. CEO Robert Ross McEwen bought 302600 shares on 01-12-2009 at $1.18

BUSINESS OVERVIEW

History and Organization

US Gold Corporation ("US Gold," "we," "us," or the "Company") is engaged in the exploration for gold, other precious metals, and base metals. We presently hold an interest in numerous properties in the State of Nevada and one property in Utah, as well as properties in the Country of Mexico. We presently hold an interest in approximately 264 square miles in the United States and approximately 1,379 square miles in Mexico. We are currently in the exploration stage and have not generated revenue from operations since 1990.

We were organized under the laws of the State of Colorado on July 24, 1979 under the name Silver State Mining Corporation. On June 21, 1988, we changed our name to U.S. Gold Corporation and on March 16, 2007, we changed our name to US Gold Corporation.

We are in the business of acquiring, exploring, and developing mineral properties in the United States, emphasizing the State of Nevada, and in Mexico. Our objective is to increase the value of our shares through the exploration, development, and extraction of gold, silver and other valuable minerals. We generally conduct our business on a 100% basis, but may enter into arrangements with other companies through joint venture or similar agreements in an effort to achieve our objectives. We own our mineral interests and property and operate our business through various subsidiary companies, each of which is owned entirely, directly, or indirectly, by us. All references to US Gold in this report include our subsidiaries as the circumstances require.

During 2007, we completed the acquisition of three Canadian companies engaged in the exploration for gold and other metals with operations adjacent to or in proximity to our Tonkin property, located in the State of Nevada. For a more detailed description of these acquisitions, see " Developments During 2007—Acquisitions ."

Our principal executive offices are located at 165 South Union, Suite 565, Lakewood, Colorado, 80228 and our telephone number is (303) 238-1438. Our website is www.usgold.com. We make available our periodic reports and press releases on our web site. Our common stock is listed on the American Stock Exchange (AMEX) and on the Toronto Stock Exchange (TSX), each under the symbol "UXG."

As used in this report, opt represents ounces per ton, gpt represents grams per tonne, ft. represents feet, m represents meters, km represents kilometer, and sq. represents square.

Developments During 2007

In June 2007, we completed three simultaneous acquisitions and significantly increased our land position. These acquisitions transformed US Gold from a single 36 square mile (58 sq. km) property into one of the Cortez Trend's largest land holders, with interests in over 170 square miles (274 sq. km). We now control a total of over 263 square miles (423 sq. km) in Nevada, giving us one of the largest and most prospective land positions in the state. We also acquired a large prospective land position in Mexico with approximately 1,379 square miles (2,219 sq. km) of mineral rights, including a former producing mine. This mine is presently held on a care and maintenance basis.

Our exploration program for 2007 incorporated what we perceived to be high priority targets acquired with the acquisitions of three Canadian companies, as well as our previously-owned Tonkin property. We completed a total of approximately 180,845 feet in exploration drilling during 2007, all in Nevada. In addition to drilling, we pursued geologic mapping, sampling, and geophysical surveys on the high priority properties. Acquisitions. On June 28 and 29, 2007, US Gold and its subsidiary, US Gold Canadian Acquisition Corporation ("Canadian Exchange Co."), completed the acquisition of all of the outstanding common shares of Nevada Pacific Gold Ltd. ("Nevada Pacific"), Tone Resources Limited ("Tone") and White Knight Resources Ltd. ("White Knight"), which we refer to individually as an "Acquired Company" and collectively as the "Acquired Companies." The transactions completed on June 28 and 29, 2007 represent the second stage of these acquisitions that were originally commenced as tender offers in February 2007 ("Tender Offer"). The first stage of the acquisitions was completed on March 28, 2007, at which time we acquired at least 80% of the common shares of each Acquired Company and took control of their operations. The Acquired Companies were acquired in exchange for the issuance of exchangeable shares of Canadian Exchange Co. (as explained below) on the following terms:


0.23 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Nevada Pacific;


0.26 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of Tone, and


0.35 of an exchangeable share of Canadian Exchange Co. for each outstanding common share of White Knight.

With these second stage acquisition transactions, the minority interests in the Acquired Companies not previously owned by us were acquired. Therefore, effective as of June 29, 2007, US Gold and Canadian Exchange Co. own 100% of the Acquired Companies.

In connection with these acquisitions, Canadian Exchange Co. issued approximately 42,615,227 exchangeable shares for the Acquired Companies. The exchangeable shares, by virtue of the redemption and exchange rights attached to them and the provisions of certain voting and support agreements, provide the holders with the economic and voting rights that are, as nearly as practicable, equivalent to those of a holder of shares of our common stock. The exchangeable shares trade on the TSX and are exchangeable for shares of common stock on a one-for-one basis. Through December 31, 2007, approximately 50% of the exchangeable shares originally issued in connection with the acquisitions had been converted into an equivalent amount of our common stock.

We believe the acquisition of the Acquired Companies was beneficial because each of them was exploring in the Cortez Trend in Nevada and controlled exploration properties that are adjacent to or near our Tonkin property, and because the acquisitions resulted in US Gold having a larger land position within the Cortez Trend and elsewhere in Nevada. US Gold also added technical expertise by retaining certain key employees of the Acquired Companies. In addition, one of the acquired companies owned properties located in Utah and in Mexico. We are presently in the exploration stage at all of the mineral properties acquired from the Acquired Companies.

Nevada Pacific's property portfolio in Nevada consists of exploration stage properties with over 80 square miles of mineral rights (expanded to approximately 90 sq. miles (145 sq. km) by end of 2007), including portions of the Cortez and Carlin Trends, and a single mineral property in Utah. Its Mexican exploration portfolio covers approximately 1,379 square miles (2,219 sq. km) of mineral rights in Mexico, including the Magistral Gold Mine in Sinaloa state, Mexico. The Magistral Mine, a former producing property, has not been in production since 2005 and as of March 8, 2008, is held on care and maintenance basis.

White Knight has been exploring for Carlin-type gold deposits in Nevada since 1993, and has participated in option and joint venture agreements on its properties. It holds interests in 19 properties in Nevada that encompass approximately 115 square miles. Tone controls interests in eight properties in Elko, Eureka, Lander, and Pershing counties in Nevada that encompass approximately 14.6 sq. miles (24 sq. km). The properties are subject to various royalty interests. In addition, up to a maximum of two of the Tone mineral properties are subject to earn-in rights by Teck Cominco American Inc. ("Teck"), pursuant to a 2004 agreement. Teck generally has the right to acquire a 50% joint venture interest in selected properties by spending approximately $2.84 million on each property after Tone has first spent an aggregate of $.94 million on each property, or they may acquire up to a 70% joint venture interest upon other elections by Teck and performance of other obligations. Tone has not reached the initial approximate $.94 million expenditure on any property subject to the Teck agreement and, as stated above, that agreement is limited to earn-in rights to a maximum of two of the mineral properties. See " ITEM 2. PROPERTIES " for a more detailed explanation of these properties.

Annual holding costs of the US properties total approximately $4.3 million and include approximately $1.4 million in federal and county mineral claim fees and $0.5 million in payments to third parties under leases. Annual holding costs of the Mexican mineral concessions and the Magistral Mine are approximately $1.6 million.

Exploration Overview. With the acquisitions completed, the Company increased its US land position from approximately 36 square miles (58 sq. km) to approximately 264 sq. miles (425 sq. km). Three top priority exploration areas have been identified subsequent to the acquisitions and are designated the Tonkin, Gold Bar, and Limo Complexes. The 2007 exploration drilling program was developed to test targets in these areas of priority. For 2007, company-wide exploration drilling totaled 180,849 ft. (55,123 m), all of which was in Nevada. During 2007, the Company incurred total exploration expenses of approximately $20 million, including drilling and assay costs, geophysical and geophysical studies, reclamation, and costs of employees and consultants. From our exploration program in 2007, we have increased our geologic knowledge of the high priority target areas, including in some cases, reinterpretation of regional geology. We have confirmed that we have favorable lower plate host rocks in some areas on our properties (which are a good host rock for gold deposition), identified a number of mineralizing structures, and added information expected to result in expansion of known gold mineralization.

In 2008, we will evaluate the 2007 results and will be aggressively exploring key projects in Nevada. In addition, we plan to undertake exploration, including drilling, at our Magistral Mine in Mexico and possibly on our prospective Mexican mineral concessions outside the Magistral area.

The 2007 exploration program, property holding and general and administrative costs, as well as the costs of acquisitions, were generally funded with proceeds of a financing completed in 2006. We spent approximately $30 million during 2007 in all our business activities. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .

Competitive Business Conditions

We compete with many companies in the mining business, including large, established mining companies with substantial capabilities, personnel, and financial resources. There is a limited supply of desirable mineral lands available for claim-staking, lease, or acquisition in the United States, as well as in Mexico and other areas where we may conduct exploration activities. We may be at a competitive disadvantage in acquiring mineral properties, since we compete with these individuals and companies, many of which have greater financial resources and larger technical staffs. From time to time, specific properties or areas which would otherwise be attractive to us for exploration or acquisition, are unavailable due to their previous acquisition by other companies or our lack of financial resources.

Competition in the industry is not limited to the acquisition of mineral properties, but also extends to the technical expertise to find, advance, and operate such properties; the labor to operate the properties; and the capital for the purpose of funding such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a world-wide basis. Such competition may result not only in our company being unable to acquire desired properties, but also to recruit or retain qualified employees, to obtain equipment and personnel to assist in our exploration activities, or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operation and business.

General Government Regulations

United States. Mining in the States of Nevada and Utah are subject to federal, state and local law. Three types of laws are of particular importance to our United States located mineral properties: those affecting land ownership and mining rights; those regulating mining operations; and those dealing with the environment.

The development, operation, closure, and reclamation of mining projects in the United States requires numerous notifications, permits, authorizations, and public agency decisions. Compliance with environmental and related laws and regulations requires us to obtain permits issued by regulatory agencies, and to file various reports and keep records of our operations. Certain of these permits require periodic renewal or review of their conditions and may be subject to a public review process during which opposition to our proposed operations may be encountered. We are currently operating under various permits for activities connected to mineral exploration, reclamation, and environmental considerations. Unless and until a mineral resource is proved, it is unlikely our operations will move beyond the exploration stage. If in the future we decide to proceed beyond exploration, there will be numerous notifications, permit applications, and other decisions to be addressed at that time. See ITEM 2, "DESCRIPTION OF PROPERTIES—Environmental and Governmental Regulations ," for additional information on government regulation affecting our business.

Mexico. Exploration and development of minerals in Mexico may be carried out through Mexican companies incorporated under Mexican law by means of obtaining exploration and development (exploitation) concessions. Exploration concessions are granted by the Mexican government for a period of six years from the date of their recording in the Public Registry of Mining and are not renewable. Holders of exploration concessions may, prior to the expiration of such concessions, apply for one or more development concessions covering all or part of the area covered by an exploration concession.

Environmental law in Mexico provides for general environmental policies, with specific requirements set forth under regulations of the Ministry of Environment, Natural Resources and Fishing, which regulate all environmental matters with the assistance of the National Institute of Ecology and the Procuraduria Federal de Proteccion al Ambiente.

The primary laws and regulations governing environmental protection for mining in Mexico are found in the General Law, the Ecological Technical Standards, and also in the air, water and hazardous waste regulations, among others. In order to comply with the environmental regulations, a concessionaire must obtain a series of permits during the exploration stage. Generally, these permits are issued on a timely basis after the completion of an application by a concession holder. We believe we are currently in full compliance with the General Law and its regulations in relation to our mineral property interests in Mexico.

Employees

As of March 7, 2008, we had 64 employees including 18 employees based in the United States, 2 in Canada and 44 in Mexico. One of our employees serves as an executive officer. That officer devotes a majority of his business time to our affairs. Robert R. McEwen serves as our Chief Executive Officer, presently in an unpaid capacity. He does not devote 100% of his business time to our affairs. None of

our employees are covered by labor contracts and the Company believes we have good relations with our employees. We also engage independent contractors in connection with the exploration of our properties, such as drillers, geophysicists, geologists, and other technical disciplines.

CEO BACKGROUND

Directors and Executive Officers

The following table reflects our current directors and executive officers as of the date of this proxy statement:


Board Position
Name

Age

Positions With the Company

Held Since

Robert R. McEwen ( Age )
58 Chairman of the Board and Chief Executive Officer 2005
Perry Y. Ing
32 Vice President and Chief Financial Officer —
Michele L. Ashby (2)(3)
52 Director 2005
Leanne M. Baker (1)(2)
55 Director 2005
Peter Bojtos (1)(3)
59 Director 2003
Declan J. Costelloe (1)(2)(3)
42 Director 2005

MANAGEMENT DISCUSSION FROM LATEST 10K

Introduction

The following discussion updates our plan of operations for the foreseeable future. It also analyzes our financial condition at December 31, 2007 and compares it to our financial condition at December 31, 2006. The discussion also summarizes the results of our operations for the years ended December 31, 2007, 2006 and 2005, and compares each year's results to the results of the prior year.

During 2007, we completed the acquisition of three Canadian companies engaged in the exploration for gold and other metals with operations adjacent to or in proximity to our historic Tonkin property, located in the State of Nevada. These acquisitions included Nevada Pacific, Tone, and White Knight. We now hold an interest in numerous properties in the State of Nevada and one property in Utah, as well properties in the Country of Mexico. In the aggregate, we hold an interest in approximately 264 square miles in the United States and approximately 1,379 square miles in Mexico. We are currently in the exploration stage and have not generated revenue from operations since 1990.

In connection with these acquisitions, our subsidiary, Canadian Exchange Co., issued approximately 42,615,227 exchangeable shares for the Acquired Companies. The transactions completed on June 28 and 29, 2007, represented the second stage of acquisitions that were originally commenced as tender offers in February 2007. With these second stage acquisition transactions completed in June 2007, the minority interests in the Acquired Companies not previously owned by us were acquired. Therefore, we and Canadian Exchange Co. own 100% of the Acquired Companies as of June 30, 2007.

The exchangeable shares, issued in exchange for the Acquired Companies, by virtue of the redemption and exchange rights attached to them and the provisions of certain voting and support agreements, provide the holders with the economic and voting rights that are, as nearly as practicable, equivalent to those of a holder of shares of our common stock. The exchangeable shares trade on the TSX and are exchangeable for shares of common stock on a one-for-one basis. Through December 31, 2007, approximately 50% of the exchangeable shares issued in connection with the acquisitions or related to these acquisitions had been converted into an equivalent amount of our common stock.

Our exploration program for 2007 incorporated what we perceived to be high priority targets acquired with the acquisitions of the Acquired Companies, as well as our previously-owned Tonkin property. We completed a total of approximately 180,845 feet in exploration drilling during 2007, all in Nevada. In addition to drilling, we pursued geologic mapping, sampling, and geophysical surveys on the high priority properties. Total cost of exploration efforts in 2007 were approximately $20 million.

Plan of Operation

Our plan of operation for 2008 is to continue with a focused exploration and evaluation program at certain of our United States properties, and to initiate exploration efforts in Mexico. Following acquisition of the Acquired Companies, we undertook a strategic evaluation of our Mexican assets, including the Magistral Mine and additional concessions which were acquired from Nevada Pacific. Following the evaluation, we have determined to conduct further exploration on those properties.

The company-wide exploration budget for 2008 is approximately $7 million which may be re-evaluated during 2008 and could be increased or decreased. Corporate general and administrative overhead cash expense for 2008 is anticipated at approximately $5 million with property holding costs projected at approximately $6 million.

Our only source of capital at present is cash on hand and possible exercise of options and warrants since we are not generating revenue. We believe that cash on hand is adequate to fund ongoing operations through 2008 and for most of 2009. We may seek additional capital funding during 2008 or beyond depending upon market conditions and other circumstances. We may also consider strategic alternatives which could include, but are not limited to, acquisition or disposition of assets, debt financing, or other corporate transactions.

Liquidity and Capital Resources

As of December 31, 2007, we had working capital of $31,755,270 comprised of current assets of $32,742,069 and current liabilities of $986,799. This represents a decrease of $16,048,096 from the working capital of $47,803,366 at December 31, 2006.

Net cash used in operations for the year ended December 31, 2007 increased to $29,369,842 from $18,129,633 for 2006. Cash paid to suppliers and employees increased to $31,029,528 for the 2007 period from $20,485,918 during the 2006 period, primarily reflecting increased exploration expenses, general and administrative costs, and property holding costs. Cash used in investing activities for the year ended December 31, 2007 was $1,997,809, primarily reflecting $5,700,942 of cash acquired with the acquisitions offset by acquisition costs of $5,314,004 and an increase in our restrictive investments of $2,075,401. This compares to cash used in 2006 of $930,465.

Cash provided by financing activities for 2007 decreased to $10,317,590, including the exercise of broker options, stock options and warrants of $10,333,674, compared to $69,304,457 generated in 2006,

primarily reflecting the financing completed February 22, 2006 of $69,295,760 net of issuance cost. The effect of exchange rate change on cash and cash equivalents was $1,057,411 for the 2007 period with no comparable amount in 2006.

Effective July 5, 2007, our placement agent in the 2006 financing exercised its broker option to acquire 1,002,000 units at an exercise price of $4.50 per unit for aggregate $4,509,000. Each unit consists of one share of common stock and one half common stock purchase warrant ("Warrant"). Each whole Warrant is exercisable until February 22, 2011 to acquire one additional share of our common stock at an exercise price of $10.00. Additionally, warrants issued related to the acquisitions and exercised in 2007 resulted in proceeds to the Company of approximately $3,954,518. Remaining replacement warrants expire in 2008 and if exercised, would result in additional proceeds to the Company of approximately $2.8 million.

On February 22, 2006, we completed a private placement of 16,700,000 subscription receipts ("Subscription Receipts") at $4.50 per Subscription Receipt, from which we received $75,150,000 in gross proceeds (the "Private Placement"). Of that total, $34,940,510 (net of issuance costs) were immediately received by us with the balance of $34,355,250 (net of issuance costs) received on August 10, 2006 with release of escrowed funds, for a total of $69,295,760 in net proceeds. Also effective August 10, 2006, each Subscription Receipt was converted, for no additional payment, into one share of our common stock and one-half of one Warrant. As discussed in "Results of Operations," the 2006 financing resulted in derivative instrument accounting at the issuance due to certain provisions included in the documents underlying that financing.

As mentioned above, our immediate capital requirements include exploration and holding costs at our various mineral properties. We believe we have adequate resources for those purposes through 2008 and most of 2009. However, if we are successful in identifying material amounts of additional mineralization, we will require additional capital to conduct feasibility studies and, if warranted, placing one or more of our properties into production. We expect such capital requirements will be satisfied from outside sources in the form of either debt or equity financing.

Tabular Disclosure of Contractual Obligations

Schedule of Contractual Obligations. The following table summarizes our obligations and commitments as of December 31, 2007 to make future payments under certain contracts, aggregated by category of contractual obligation, for specified time periods:

Results of Operations

Year Ended December 31, 2007 compared to 2006

General. For the year ended December 31, 2007, we recorded a loss before minority interests of $28,933,773 or $(0.35) per share, compared to a net loss for 2006 of $72,650,040 or $(1.82) per share. The substantial decrease in net loss from 2006 was primarily the result of the absence of non-cash derivative instrument expense of $51,680,941 in 2007. In July 2006, the Company entered into agreements that modified the terms of the indentures related to the February 2006 financing and the derivative liability balance was reclassified into common stock within shareholders' equity during the third quarter of 2006.

Costs and Expenses. General and administrative expense for the year ended December 31, 2007 increased $3,127,457 compared to 2006, primarily due to increases in legal of $824,288, audit and tax preparation expenses of $402,159 and $997,797 in higher salaries. The increase in salaries, is attributable to additional staff we added to manage our increased operations.

Acquisition costs for the 2007 period until the date the acquisitions were considered probable, approximately January 31, 2007, were $451,553 while during 2006, $6,833,845 was recorded. Property holding costs for the 2007 period related to the Tonkin project as well as properties of the Acquired Companies after the acquisition date of March 28, 2007, increased to $3,071,587 compared to $1,949,556 in 2006 which all related to the Tonkin project.

Exploration costs in the 2007 period were $20,007,318, reflecting an active drilling program at certain Nevada properties, while during 2006 the exploration program for the Tonkin project had costs of $9,613,260. Accretion of asset retirement obligation for 2007, primarily reflecting the Tonkin and Magistral mine properties, increased to $386,864, compared to $269,621 for 2006 when only the Tonkin project was included. Depreciation costs in the 2007 period were $475,256 compared to $73,701 during 2006, with the increase primarily reflecting depreciation of the Magistral mine assets subsequent to the March 28, 2007 date of acquisition.

Other Income (Expenses). Interest income for 2007 decreased to $1,587,064 compared to $2,533,137 in 2006, reflecting lower average levels of interest bearing deposits during 2007. In 2007, the Company reached a settlement with a vendor as to outstanding fees, recognizing a gain of $693,852. During 2007, the Company recorded a foreign currency gain of $1,198,508 mainly due to the weakening U.S. dollar against the Canadian dollar and its effect on our net monetary assets that are denominated in Canadian dollars.

Year Ended December 31, 2006 compared to 2005

General. For the year ended December 31, 2006, we recorded a net loss of $72,650,040, or $(1.82) per share, compared to a net loss of $2,990,721 or $(0.12) per share for 2005. The substantial increase in the net loss from 2005 compared to 2006 is primarily attributable to the following items in 2006: (i) derivative instrument expense (a non-cash expense) of $51,680,941, (ii) an increase in general and administration expenses of $2,011,537, (iii) exploration expenses of $9,613,260, and (iv) the expenses of proposed acquisitions of $6,833,845.

In connection with the Private Placement, we determined that the issuance of the Subscription Receipts and Warrants resulted in derivative instrument and the related accounting. The Private Placement closed February 22, 2006 and derivatives instrument accounting was applicable until July 24, 2006, the date the subscription agreements were modified and derivative accounting was no longer required. The charge of $51,680,941 represented the net unrealized (non-cash) change in the fair value of our derivative instrument liabilities during the period January 1, 2006 through July 24, 2006 related to the Warrants and embedded derivatives in the Subscription Receipts that were bifurcated and accounted for separately and represented our single largest expense in 2006. With the termination of derivative instrument accounting effective July 24, 2006, the derivative liability balance determined at that date of $51,680,941 was reclassified and transferred into common stock within shareholders' equity.

Costs and Expenses. General and administrative expense for 2006 increased $2,011,537 compared to the same period of 2005. Expenses during 2006 primarily reflect approximately $1,147,372 of non-cash stock option expense, approximately $484,291 in higher legal fees related to increased corporate activities, approximately $938,637 in increased costs related to shareholder communications and investor relations programs, and approximately $680,402 in costs of our Toronto office with no
comparable costs in 2005. In 2005, general and administrative expense included stock compensation expense of $294,400 and $1,423,824 of contract termination expense.

During 2006, we spent approximately $6,833,845 related to the acquisition of the Acquired Companies, including legal fees of approximately $3,900,000, other professional fees, consulting, printing and accounting fees and expenses.

Holding costs associated the Tonkin property totaled $1,949,556 in 2006, while during the corresponding period of 2005, only $761,081 of similar costs were incurred since our prior joint venture partner BacTech was responsible for funding those costs until May 12, 2005. The 2006 costs included annual advance royalty payments of $241,150 with the remainder reflecting property holding costs for minimum maintenance of activities. Exploration costs at the Tonkin property for 2006 totaled $9,613,260 for drilling and other work at the property as well as $371,486 of non-cash stock option expense, all of which was expensed since we have no proved reserves. We were unable to perform any exploration in 2005 due to a lack of working capital.

During the 2006 period, we did not incur any write-offs, as we did in 2005 when we wrote off the remaining purchase price from our former partner when that company withdrew from Tonkin Springs LLC ("TSLLC") and whose subsidiary recognized a loss on investment determined by an independent third party to have a fair value of $168,960. Accretion costs of the retirement obligation at the Tonkin property for 2006 totaled $269,621 while in the corresponding period of 2005, $110,243 was recorded subsequent to the withdrawal of our partner.

Other Income (Expenses). Interest income for 2006 was $2,533,137, reflecting earnings on the proceeds from the Private Placement as well as interest on restricted time deposits for reclamation bonding, compared to $32,032 in 2005.

Critical Accounting Policies

We believe the following critical accounting policies are used in the preparation of our consolidated financial statements.

Mineral Property Interests, Exploration and Development Costs: Mineral property interests include acquired mineral, development and exploration stage properties. The amount capitalized related to a mineral property interests represents its fair value at the time it was acquired, either as an individual asset purchase or as a part of a business combination. The value of such assets is primarily driven by the nature and amount of mineralized material believed to be contained in such properties. Exploration costs are expensed as incurred. Development costs are capitalized when proven and probable reserves exist and the property is a commercially minable property. Mine development costs incurred either to develop new ore deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production are capitalized. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company periodically evaluates whether events or changes in circumstances indicate that the carrying value of mineral property interests and related property, plant and equipment may not be recoverable. Recoverability and impairment is measured by comparing net book value to estimated fair value.

Asset Retirement Obligation: The Company implemented SFAS No. 143, "Accounting for Asset Retirement Obligations," effective January 1, 2003. SFAS No. 143 requires the fair value of a liability for an asset retirement obligation to be recognized in the period that it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. Ongoing environmental and reclamation expenditures are credited to the asset retirement obligation as incurred to the extent they relate to asset retirement obligation and to expense to the extent they do not so apply.

Goodwill: The Company has identified two reporting units, United States and Mexico, and assigned goodwill to these reporting units as appropriate. The Company evaluates, on at least an annual basis, the carrying amount of goodwill by comparing the estimated fair value of its reporting units to their carrying amounts. If the carrying value of a reporting unit exceeds its estimated fair value, the Company compares the implied fair value of the reporting unit's goodwill to its carrying amount, and any excess of the carrying value over the fair value is charged to earnings. The Company's fair value estimates are based on numerous assumptions and it is possible that actual fair value will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.

Business Combinations: The Company evaluates acquisitions to determine if the transaction should be accounted for as a business combination or an asset acquisition based upon the criteria set forth in Emerging Issues Task Force ("EITF") Issue No. 98-3, "Determining Whether a Non Monetary Transaction Involves Receipt of Productive Assets or of a Business." The determination of whether a transaction results in a business combination involves some judgement and in the event our determination was inappropriate, our accounting for such transaction could be significantly different.

Recent Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, "Fair Value Measurements". SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement addresses how to calculate fair value measurements required or permitted under other accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adoption of SFAS No. 157 on our financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)". SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. SFAS No. 158 requires prospective application, recognition and disclosure requirements effective for a company's fiscal year ending December 31, 2007. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. This requirement is effective for a company's fiscal year ending December 31, 2009. We are currently evaluating the impact of the adoption of SFAS No. 158 and do not expect that it will have a material impact on our financial statements.

In December 2007, the FASB issued FASB Statement No. 141(R), "Business Combinations," which amends SFAS No. 141, and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for the Company's fiscal year beginning January 1, 2009 and is to be applied prospectively. The Company is currently evaluating the potential impact of adopting this statement on the Company's consolidated financial position, results of operations or cash flows.

In December 2007, the FASB issued FASB Statement No. 160, "Noncontrolling Interests in Consolidated financial Statements- an amendment of ARB No. 51" which establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and the noncontrolling interest, changes in the parent's ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for the Company's fiscal year beginning January 1, 2009. The Company is currently evaluating the potential impact of adopting this statement on the Company's consolidated financial position, results of operations or cash flows.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 concerning our ability to develop and produce gold or other precious metals from any of our properties, future business plans and strategies, future revenue and the receipt of working capital, and other statements that are not historical in nature. In this report, forward-looking statements are often identified by the words "anticipate," "plan," "believe," "expect," "estimate," and the like. These forward-looking statements reflect our current beliefs, expectations and opinions with respect to future events, and involve future risks and uncertainties which could cause actual results to differ materially from those expressed or implied.

In addition to the specific factors identified under Risk factors above, other uncertainties that could affect the accuracy of forward-looking statements, include:


decisions of foreign countries and banks within those countries;


technological changes in the mining industry;


our costs;


changes in our business strategy;


interpretation of drill hole results and the geology, grade and continuity of mineralization;


the uncertainty of reserve estimates and timing of development expenditures; and


commodity price fluctuations

This list, together with the factors identified under Risk factors, is not exhaustive of the factors that may affect any of the company's forward-looking statements. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect. These forward-looking statements represent our beliefs, expectations and opinions only as of the date of this report. We do not intend to update these forward-looking statements except as required by law. We qualify all of our forward-looking statements by these cautionary statements.

Prospective investors are urged not to put undue reliance on forward-looking statements.



MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview



The following discussion updates our plan of operation for the foreseeable future. It also analyzes our financial condition at September 30, 2008 and compares it to our financial condition at December 31, 2007. Finally, the discussion summarizes the results of our operations for the three and nine months ended September 30, 2008 and compares those results to the three and nine month periods ended September 30, 2007. We suggest that you read this discussion in connection with the MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION contained in our annual report on Form 10-K for the year ended December 31, 2007.



Plan of Operation



Our plan of operation for the remainder of 2008 is to continue our multi-year exploration and evaluation program at the combined Nevada properties and our Mexico properties. The original company-wide exploration budget for 2008 was approximately $6.7 million. The budget for 2009 is currently under consideration During the second and third quarter of 2008, the Company re-evaluated the exploration budget and increased it to $11.4 million. The US exploration budget for 2008 is approximately $5 million, of which approximately $4.6 million has been spent during the nine months ended September 30, 2008. Priority exploration drilling targets have been identified on the Tonkin, Gold Bar and Gold Pick properties, each on the Cortez Trend, and the Limo property on the Carlin Trend. Additional targets are being developed through the ongoing exploration process. During the fourth quarter, we also expect to conduct drilling at our Utah property. The original exploration budget of $1.7 million for the Mexico properties in and around the Magistral mine has been revised to $6.4 million. Approximately $5.4 million has been spent in Mexico during the nine month period ended September 30, 2008. As a result of encouraging mineralization encountered during drilling in the current year, the Company expects to spend an additional $1 million for Mexican exploration activities for the remainder of the year.



Our only source of capital at present is cash on hand and the possible exercise of options, since the Company has no revenue. Assuming that ongoing operations and exploration activity are consistent with budgeted activity and related cash used in operations, the Company believes that cash on hand is adequate to fund ongoing operations through 2008. The Company anticipates requiring additional capital funding in order to continue our plan of operations in 2009. The Company is currently evaluating strategic alternatives in order to meet these funding requirements, including possible acquisition or disposition of assets, debt or equity financing, or other alternatives to fund operations. Due to the current volatility in the equity markets and uncertainties arising from adverse economic developments, there can be no assurance that the Company can obtain financing.



Liquidity and Capital Resources



As of September 30, 2008, we had working capital of $15,204,556, comprised of current assets of $17,075,858 and current liabilities of $1,871,302. This represents a decrease of approximately $16,550,716 from the working capital of $31,755,270 at fiscal year end December 31, 2007.



Net cash used in operations for the nine months ended September 30, 2008 decreased to $14,552,824 from $24,825,389 for the corresponding period in 2007. Cash paid to suppliers and employees decreased to $14,996,929 during the 2008 period from $26,124,288 during the 2007 period, primarily reflecting reduced exploration expenses and decreased expenses incurred in connection with the acquisition of the Acquired Companies. Cash used in investing activities for the nine months ended September 30, 2008 was $338,133, compared to $1,307,288 in the comparable period of 2007, primarily reflecting a decrease in acquisition costs and decrease in our restrictive investments.

Table of Contents



Cash provided by financing activities for the first nine months of 2008 totaled $257,181, which came from the exercise of warrants. This compares to $6,134,251 of cash generated from financing activities in the comparable period of 2007.



Results of Operations



Nine month period ended September 30, 2008 compared to nine month period ended September 30, 2007



For the nine months ended September 30, 2008, the Company recorded a net loss of $124,475,810 or $(1.29) per share, compared to a net loss for the corresponding period of 2007 of $23,148,951 or $(0.30) per share. Excluding goodwill impairment recorded during the third quarter of $107,017,283, the net loss for the nine months ended was $17,458,527 or $(0.18) per share. During the 2008 period, the Company recorded a foreign currency loss of $703,862, reflecting a stronger U.S. dollar against the Canadian dollar and its effect on the net monetary assets that are denominated in Canadian dollars.



General and administrative expense in the nine months ended September 30, 2008 decreased by $1,178,218 compared to the same period of 2007, primarily due to decreases in stock option expense, shareholder communications and legal expenses, partially offset by increases in audit and tax expenses and salaries. The decrease in stock option expense reflects forfeitures during the current year. The increase in salaries is attributable mainly to severances from the closure of our Denver office. There were no expensed acquisition costs for the nine month period ended September 30, 2008, while during the corresponding period of 2007, $451,379 was recorded.



Property holding costs during the 2008 period related to the combined Tonkin project and acquired properties from 2007 increased to $1,627,125 compared to $1,102,521 in 2007, primarily due to the acquired properties from 2007. In 2007, property holding costs incurred for the acquired properties were for only three months since the acquisition were completed in June, as compared to the full nine months of spending in 2008.



Exploration costs in the 2008 period were $10,016,369, reflecting an active drilling program in Mexico and Nevada, while during the same period of 2007, the exploration program for the Tonkin project and the acquired properties had costs of $18,134,966.



Total stock option expense in the 2008 period decreased to $416,452 compared to $1,683,391 for the same nine months of 2007, reflecting an increase in forfeitures in 2008. Stock option expense is split between the general and administrative and exploration costs lines within the income statement.



Accretion of asset retirement obligation at Tonkin and the acquired properties for the nine months ended September 30, 2008 increased to $534,512, compared to $303,002 in the same period of 2007. Interest income in the 2008 period decreased to $543,122 compared to $1,369,620 in 2007, reflecting lower average levels of interest bearing deposits during the 2008 period.



In accordance with its accounting policies, the Company conducts an annual goodwill impairment test during the fourth quarter of each year, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Based on a combination of factors, including the current economic environment and a sustained decline in the Company’s market capitalization, the Company concluded that there were sufficient indicators to require it to perform the annual goodwill impairment analysis as of September 30, 2008. As a result of that analysis, the Company has concluded that an impairment loss has occurred and accordingly, it has recorded a $107,017,283 non-cash goodwill impairment charge during the third quarter of fiscal 2008 related to all the goodwill recorded in 2007 in connection with the acquisition of the Acquired Properties.



Three month period ended September 30, 2008 compared to three month period ended September 30, 2007



For the three months ended September 30, 2008, the Company recorded a net loss of $114,806,431, or $(1.19) per share, compared to a net loss for the corresponding period of 2007 of $6,023,071 or $(0.06) per share. Excluding

Table of Contents



goodwill impairment recorded during the quarter of $107,017,283, the net loss for the three months ended was $7,789,148 or $(0.08) per share. During the three months ended September 30, 2008, the Company recorded a foreign currency loss of $431,840, mainly due to the strengthening U.S. dollar against the Canadian dollar and its effect on the net monetary assets that are denominated in Canadian dollars.



General and administrative expense decreased to $1,237,000 in the three months ended September 30, 2008 compared to $2,423,004 for the same period of 2007, primarily due to decreased staff and salaries, shareholder communications, accounting and audit expenses and legal fees. There were no expensed acquisition costs for the three month periods ended September 30, 2008 or 2007.



Exploration costs in 2008 were $5,707,845, reflecting an active drilling program in Mexico and Nevada, as compared with $4,823,382 for the same period of 2007, reflecting increased activity under the current drilling program in Mexico.



Total stock option expense in the 2008 period decreased to $188,895 as compared to $564,506 recorded for the same period in 2007, primarily due to increased forfeitures in 2008. Stock option expense is split between the general and administrative and exploration costs lines within the income statement.



Accretion of asset retirement obligation at Tonkin and the acquired properties for the three months ended September 30, 2008 increased to $254,540 compared to $110,409 in the same period of 2007. Interest income in the 2008 period decreased to $168,803 compared to $470,821 in 2007, reflecting lower average levels of interest-bearing deposits during the 2008 period.



The Company has concluded that an impairment loss has occurred and accordingly, it has recorded a $107,017,283 non-cash goodwill impairment charge during the third quarter of fiscal 2008.



Recent Accounting Pronouncements



In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement addresses how to calculate fair value measurements required or permitted under other accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. As of January 1, 2008, we adopted SFAS No. 157. There was no cumulative effect related to the adoption of SFAS No. 157 and the adoption did not have a material impact on our financial position or results of operations.



In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)”. SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. SFAS No. 158 requires prospective application, recognition and disclosure requirements effective for a company’s fiscal year ending December 31, 2007. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. This requirement is effective for a company’s fiscal year ending December 31, 2009. We are currently evaluating the impact of the adoption of SFAS No. 158 and do not expect that it will have a material impact on our financial statements.

Table of Contents



In December 2007, the FASB issued SFAS Statement No. 141(R), “Business Combinations,” which amends SFAS No. 141, and provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective for the Company’s fiscal year beginning January 1, 2009 and is to be applied prospectively. We are currently evaluating the potential impact of adopting this statement on our consolidated financial position, results of operations or cash flows.



In December 2007, the FASB issued SFAS Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements- an amendment of ARB No. 51” which establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and the noncontrolling interest, changes in the parent’s ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for the Company’s fiscal year beginning January 1, 2009. We are currently evaluating the potential impact of adopting this statement on our consolidated financial position, results of operations or cash flows.



In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” which provides revised guidance for enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and the related hedged items are accounted for under FAS 133, and how derivative instruments and the related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for the Company’s fiscal year beginning January 1, 2009 and is to be applied prospectively. We are currently evaluating the impact of this standard on our disclosure. Since we currently do not have any derivative instruments, we do not expect any impact upon adoption of this statement.



In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS No. 162 is effective 60 days following the Security and Exchange Commission’s (“SEC”) approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with GAAP.” We do not expect the adoption of SFAS No. 162 to have an impact on our consolidated financial position, results of operations or cash flows.



Forward-Looking Statements



This report contains or incorporates by reference “forward-looking statements,” as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:



• statements concerning the benefits that we expect will result from our business activities and certain transactions that we contemplate or have completed, such as increased revenues, decreased expenses and avoided expenses and expenditures;



• statements concerning the results of our exploration program; and



• statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.



These statements may be made expressly in this document or may be incorporated by reference to other documents that we will file with the Securities and Exchange Commission (“SEC”). You can find many of these statements by looking for words such as “believes,” “expects,” “anticipates,” “estimates” or similar expressions used in this report or incorporated by reference in this report.

Table of Contents



These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied in those statements. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied. We caution you not to put undue reliance on these statements, which speak only as of the date of this report. Further, the information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes in such facts or assumptions.



Risk Factors Impacting Forward-Looking Statements



The important factors that could prevent us from achieving our stated goals and objectives include, but are not limited to, those set forth in other reports we have filed with the SEC and the following:



• The success of our ongoing exploration program;



• The worldwide economic situation;



• Any change in interest rates or inflation;



• The willingness and ability of third parties to honor their contractual commitments;



• Our ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the gold mining industry for risk capital;



• Our costs of exploration and production, if any;



• Environmental and other regulations, as the same presently exist and may hereafter be amended;



• Our ability to identify, finance and integrate other acquisitions; and



• Volatility of our stock price.



We undertake no responsibility or obligation to update publicly these forward-looking statements, but may do so in the future in written or oral statements. Investors should take note of any future statements made by or on our behalf.



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



Our exposure to market risks includes, but is not limited to, the following risks: changes in foreign currency exchange rates, changes in interest rates, equity price risks, commodity price fluctuations, and country risk. We do not use derivative financial instruments as part of an overall strategy to manage market risk.



Foreign Currency Risk



While we transact most of our business in US dollars, some expenses, labor, operating supplies and capital assets are denominated in Canadian dollars or Mexican pesos. As a result, currency exchange fluctuations may impact our operating costs. The appreciation of non-US dollar currencies against the US dollar increases costs and the cost of purchasing capital assets in US dollar terms in Canada and Mexico, which can adversely impact our operating results and cash flows. Conversely, a depreciation of non-US dollar currencies usually decreases operating costs and capital asset purchases in US dollar terms.



The value of cash and cash equivalents denominated in foreign currencies also fluctuates with changes in currency exchange rates. Appreciation of non-US dollar currencies results in a foreign currency gain on such investments and a decrease in non-US dollar currencies results in a loss. We have not utilized market risk sensitive instruments.

CONF CALL



The Wall Street Analyst Forum, a leading conference host for public corporations to address analysts/portfolio managers and professional investors, sponsors four annual conferences in NYC for large, mid and small-cap companies. Seeking Alpha readers may attend Wall Street Analyst Forum conferences free of charge if you pre-register. See the full conference schedule and attendance information.

Read all Wall Street Analyst Forum conference presentation transcripts here.

To learn more about sponsoring investor conference presentation transcripts see here.

Ian Ball

Thank you very much. I want to start this presentation today by saying gold is money. It is the ultimate form of currency. If you take a step back and you look at the long-term economic cycle, you will see there have been certain periods of time where gold's been the ultimate currency to hold. I believe as this decade continues to play out, we are going to do see gold outperform every major currency.

Gold is universally accepted. You can get your money back within two days, even faster if you sell it on the street. And I think we are going to see a premium being built into the gold price, because it’s liquid. You can sell it anywhere in the world.

The current bull market that we are experiencing with gold started back in 2001 and during this time period you had the price of gold rising, but it is only relative to a falling U.S. dollar. So if you were in Europe or you were in South America, gold wasn't that exciting, because it’s going flat in your local currency.

And then something interesting started to happen. In the summer of 2005, France and the Netherlands voted down the EU constitution, so investors were asking, where do I put my cash? I am not going to put it in the U.S. Dollar, because it’s going down, I am not going to put it in Euros, because there is uncertainty.

So people started to put it in gold and gold started to move against every major currency in the world. So instead of having a market of 300 million people, which would be the United States, we now have a market of 6 billion people, a 20-fold increase looking at the gold price. And as you can see from this chart, basically in the summer of 2005 gold has started to move, with the Euro and Pound, the South African Rand or the Australian Dollar. It started to get worldwide attraction.

I think the current state of ramp-up in gold is going to last until the end of 2008 when it’s going to touch its old high of $850 an ounce and then you are going to see gold move higher, and by the end of 2010, we think gold is going to touch $2,000 an ounce.

What you are seeing here is a graph, and we have taken the Dow Jones Industrial Average and divided it by the price of gold, and then historically there has been a ratio that has linked the two together.

If you look back to 1896, one ounce of gold bought the Dow, and then we entered the 1920s, and by the peak of the market in '29, it took 18 ounces of gold to buy the Dow. Now we all know what happened in '29. The market rolled over. We entered into the great depression and by 1932 it went to 2 ounces of gold to buy the Dow.

Look at the 1960s, this was really a golden era for stock, and by 1966 it took 28 ounces of gold to buy the Dow. Now if you were to pose the question back in '66, whether 1 ounce of gold would ever buy the Dow again, you would have found very few believers.

In 1980, 1 ounce of gold bought the Dow, the Dow wasn’t at 14,000, it wasn’t at 7,000, it was at 800. The price of gold was 800, and you had to come back down to the one-to-one ratio.

If you look at 1999, during the height of the tech market, it took 44 ounces of gold to buy the Dow. Once again, if you were in '99 and you were to ask the question whether the price of gold and the Dow will ever trade one-to-one again, you would've found very few believers. But that's exactly what's happening. We've cut that number in half.

Well, today it only takes 20 ounces of gold to buy the Dow. So the question for everybody is, are we going back down to the one-to-one, or one-to-two ratio? Or is this line going to invert and go higher? What we are betting on over the next three to four years is that you're going to see gold have more purchasing power than the Dow.

What you're seeing here is a lack of generation of knowledge among investors where a tremendous amount of confidence goes into financial assets and that confidence is lost and people return to hard assets and the number one asset has always been gold. So if you believe in gold and you want to get exposure of what you buy, you buy the physical metal or you buy gold shares.

Well, if you look at the period '29 to '39, the Dow was down 60%, you had the price of gold up 69% through government edict and you had a Homestake Mining, which was the largest gold mining company of its time, up 500%. You look at the second period, the Dow was up 8%, the price of gold up 2300% and you have Homestake Mining up about 500% again. You look at today's period, the Dow's at 20, you have the price of gold up at 160 and you have the XAU, which is really an index of large gold mining companies, it’s up about 140% and we have used it and replaced the Homestake, because Homestake was purchased back in 2001.

So during the first period you had gold box A performing. Second period gold A performed. Currently they are both even. For history it is really a good process to tell you what's going to perform in its current market. Our recommendation will be to own both, own the shares, own the bullion, because you'll hate to be right about the gold price, but wrong about the diversification strategy.

So what's possible for the gold price? Well, if you take the high of 1980, which is $850 an ounce and you adjusted for inflation, you get a price of $2,200 today. If you look at the period from 1929 to 1939 where the Dow declined by 60% and you were to assume that was going to happen again today and you apply the 2:1 gold ratio that we’re showing, you get a price of over $1,800 an ounce. If you look at the period 1966 to 1980 when the Dow was flat for 14 years and we were to assume that was going to happen again today and you apply the 2:1 goal ratio, you get a price of over $4,600 an ounce.

All prices are well in excess of what we are trading at today. We are quite bullish on the price of gold. The problem is a lot of the companies that are looking to put a mine to production or currently producing, are failing to deliver on the promise. We are seeing a lot of projects being recycled in this gold market, for the third and fourth time. And you are seeing a tremendous amount of inflationary cost. You are seeing record high energy prices, you are seeing labor shortages. These companies’ inability to deliver a mine on budget and on time is become comical.

At US Gold, we are focused on making a world class discovery, one that has the ability to generate serious wealth for investors. We are not focused on trying to put some little, historical mine back into production.

So if you were to take a look at how the various gold companies have performed over the past 10 years, you get a big difference. If you focus on the senior gold stocks, these are the companies with the CEOs that are making over $5 million a year, taking down a lot of stock options, yet their ownership in that company is microscopic, almost non-existent. And their share prices have been nothing over the past ten years. You have the price of gold up 70%, yet the best performing senior stock that’s only gone 23% Barrick Gold. You have Newmont Mining, which is the love of all the institutional investors, because it is the only gold stock in the S&P 500. It’s now 14%.

Then you have Kinross Gold, which is really a hodge-podge of company that’s grown through acquisition. It’s now 47%. Therefore, there is a perception among investors that if you put your money in a big company, it’s going to be safe. But there is real difference between perception and reality, because in the gold industry, the big companies have lost you a tremendous amount of money. Because the CEOs of these companies have gone out, they have done acquisitions and you've got to remember, it’s extremely easier to grow your top line, it’s very easy to grow your bottom line, but with regard of per share metrics, cash flow per share, earnings per share, that’s what matters.

If you look at the mid-tier gold companies, they have done better. The best performing company of this group is Goldcorp, it was founded and led for 18 years by US Gold’s Chairman and CEO, Robert McEwen. But if you look at the juniors, the juniors have been the real growth story of the gold sector. Now a lot of great fortunes in the United States have been made off of big metal discoveries. If you walk down 5th Avenue and you look at the Guggenheim, it was funded through major discoveries in Colorado, Alaska and Chile. If you look at the Gaby portion, it was founded through big oil discoveries in the United States and then the Middle East. I am willing to bet that nobody here is going to create America’s next portion by investing in a senior gold stock. It simply will not happen.

Now the downside of risk in investing in a junior exploration company is your investment can go to zero. But if you are fortunate enough to invest in a company that makes a big discovery, you are not looking at a percentage move in your share price. You are looking at multiples of your share price 10, 20, 30 times on your mine.

These are some of the companies that have made significant gold discoveries -- the last company that I was at with the Chairman and CEO of US Gold was Gold Corp, where we had a tremendous run over a period of about 15 years, which we are trying to replicate through US Gold.

What’s interesting though, especially with the mining sector, if you are familiar with it, is that if you look back to the 1960s there was the expectation in both the market and society. We used to watch movies like “Lawrence of Arabia” where you have the screen, which changed every 30 seconds; things were really slow and this is how mining companies reacted during the ‘60s and they just plodded along doing their thing.

But things have changed today, instead of having the 1960s expectations; you see movies that we are watching where the screen changes every three seconds, not every 30 seconds. For mining companies, most mining companies move at a glacial speed, they forget that you have hedge funds in the market, private equity, individual investors, all demanding more out of their investment. And these mining companies just don't seem to care, because most of their management teams don't own any stocks, they just do their thing. And if this market wants to be relevant in the broader scheme of things, the rates of return that we deliver are going to have to improve from what they've historically done.

So now I want to spend some time on US Gold. Our focus is Nevada. If you look at the size of the state, it is three times the size of England. It is larger than Germany and it is home to two million people and the fastest growing city in the United States, Las Vegas.

If you would think of it as a country, it would rate fourth in the world in terms of gold production. If you were to look at the number of million ounce deposits per square foot, it would rate number one in the world. This is the place to be if you want to be looking for gold.

We took over US Gold in September 2005 and we started to establish a number of corporate goals. The first was to bring in a new management team. We want to have a group of geologists that have made significant gold discoveries within Nevada.

Second, we want to have an extremely strong balance sheet. There were a number of pressing liabilities in this company when we entered the picture, so we put in $3 million of our own money to eliminate those liabilities; we raised $75 million last year to give us a very strong balance sheet.

Third, we want to have a very aggressive exploration program, because all too often you have these junior exploration companies go out, they drill three holes, they find no gold and they go back to the market to finance, and when they do that, they are going to loot their shareholder. We want to have enough money in the bank that we go flat out for three straight years. We moved the company from the OTC Exchange onto the America and Toronto Stock Exchange. Our last goal is to make a significant gold discovery.

Why Nevada? Why did we make the decision to go here? Well, it's become one of the most exciting places in the world if you are looking for gold. The state is dominated by the two largest gold producers, Barrick and Newmont.

Last year, Barrick paid $10.4 billion for a company called Placer Dome. Its most valuable assets were located in Nevada. Now $10.4 billion might seem like a lot of money but I am willing to bet the prices are going to go higher. One, I think the price of gold will go higher. But two, if you ever had the opportunity to meet a CEO of a large mining company you will see that they've got tremendously big egos. You have investment bankers walk into their office and the way they approach is, well, if you do my deal I can make you the 10th largest gold producer in the world or I can make you the fifth, or I can make you the second. So, the CEO does really have a lot of time on their hands, from what I see, to do these deals. Unfortunately it's really bad for the shareholders.

When we got in, because we came from a large company, Goldcorp had a market cap left at $8 billion. So, when we got into exploration we said, well, there are hundreds if not thousands of other exploration companies out there in the world, what's going to separate us? What's going to give us a competitive advantage? What's going to make an investor look at this company and say I want to own their shares?

So we have gone out and tried to create Nevada's premier exploration company. And what does the market currently lack in a junior company? We said well, we want to establish a company that had figure and position right up there with Barrick and Newmont, the two largest in the world. We want to have an exploration budget that will be up there with the senior gold producers. We want to have trade and liquidity of a mid-tier producer, so we will be attractive to both institutional and individual investors because too often these small companies, institutions can't touch. They can’t get in, they can’t get out, so basically the company has no service for their shareholders, because it is a big market that they can't touch.

We want to have all these qualities, but still have the potential upside of a junior. So to give you little bit of history on Nevada, I'll take you back to the mid 1980s and there was the property that came up for sale called Goldstrike. It was located in this region called the Carlin Trend. The asking price was $66 million. It had 600,000 ounces located on it, located in a number of small deposits at surface. This property was shot all over the street. Nobody would touch it. Not even Newmont, who has had the mine right next door. And then there was a small company called Barrick. They came along and they said, we will pay your asking price and everybody thought they were nuts. But their geologist had a hunch.

What you are seeing at the surface was actually connected to a much larger, richer system at depth. And they were right, that 600 thousand ounces turned to 50 million ounces and became the backbone for what is today the largest gold producing company in the world. This one mine currently produces two million ounces of gold annually. That represents about 25% of Barrick’s production. It is Barrick’s second largest mine, 16, 17 years after it was originally discovered.

So, once people saw that, they started thinking, well, maybe the potential of Nevada is to go deeper. That’s maybe where the rich ore bodies are to be found, not at the surface. Today, for the 180 million ounces that have been discovered in the Carlin Trend, 60 million ounces have been produced. This is one of the most significant areas in the world for gold.

30 miles to the west, there was another area. This was called the Cortez Trend. It has a number of gold showing at the surface, a number of small mines and people looked at it and they said, well it doesn’t have the same potential. Yeah, sure there is gold there, but the system is different in Carlin. So people at first wrote it off. This is the share price of Barrick after it made its discovery in Nevada, not a bad run, 3700% in about 7 years.

But if you look at the Cortez Trend in 1989, something interesting started to happen. There was a small discovery called Gold Acres. Its geology looked very similar to what they were seeing in Carlin, but people said well, that may be true, but it’s small, so it doesn’t matter. Then in 1991, there was a big Carlin discovery called Pipeline and people looked at it and said, well, sure, but it’s a one-off, it’s not important. And then in 2003, there was another large Carlin-type discovery called Cortez Hills, and people started to ask themselves how many more of these Carlin discoveries do we have to make before we say this is Carlin. We saw this coming at US Gold, so this is the trend that we want to be in, because this is very similar to what the Carlin Trend experienced back in the 1980s.

The company that discovered Cortez Hills in the span of six months tapped $4 billion in market cap. So it really had a tremendous impact on this company. Barrick Gold, the company that took over Placer Dome, they recently put out these drill results of the Cortez Hill deposits and I won't go into the details of them. But the greater richness that you are seeing here makes this deposit one of the biggest, probably most exciting gold discoveries in the past 10 years, anywhere in the world.

When we came into US Gold, this is what the Cortez Trend looked like. You had Barrick in the grey -- sorry Barrick in the red, Newmont in the grey, the top of the trend, they are also located at the bottom of the trend and you had a number of junior exploration companies right in the middle, US Gold being in the gold color property. So, if you are an investor and you want to get exposure to the Nevada exploration and you actually say, well who do I buy? I don't want to touch the seniors, but how could I tell which one is a junior exploration company? So, we thought we’d make the process very simple.

Earlier this year, we purchased three companies that surrounded us to give the 170 square miles in the heart of the trend. To show you the size of that, 170 square miles is three and a half times the size of Manhattan. It’s a very big piece of real estate to own. Now, there are a number of examples that I could show you just to basically demonstrate the importance of this land position. I think one of the most relevant is Cortez Burner; like a hamburger you have your top and bottom buns, and these are the senior gold stocks, they are the fatty carbohydrates, as an investor you don't want to be touching, and you have US Gold, which is the meat of the hamburger, we are the proteins, this is where the growth is. This is the best part of any burger and for investors that was the best part of any investment.

US Gold right now is focused on four key projects. Our exploration program is right up there with the senior gold stocks in Nevada, yet I believe we don't hold all the excess baggage. The early results that we retained from these properties have been extremely encouraging. The grades and width have been similar to what you've seen in other big discoveries within Nevada.

What's really interesting though is that one of the companies that we acquired, called Nevada Pacific, they are focused on gold exploration. Yet, we had an extreme high grade showing of base metal on their property. We came across this showing, which basically assayed if you put a dollar value of $2,200 per ton. Gold Port, the company that we came from, it owned the richest gold mine in the world and the value of its rock was $1,400 per ton. So you have this extremely high grade showing at the surface and there is an old historical mine, I have been there, which also mines high-grade base metal. So right now we have a drill there focusing on this, even though we are a gold company rather than a base metal.

The way that I look at it is that you can invest in the senior and if they make a discovery you're going to get maybe 20% to 30% move in your share price. If you make that same investment in a junior company who makes a large discovery, you are not looking at 20% move, you are pretty much on the rocket ride to the top four.

Now, I am willing to bet that if we are fortunate enough to continue to expand the size of what we found to-date or make a significantly new discovery, you have Barrick and Newmont, meaning pretty heavily over the property boundaries and I say that because Newmont already let the Goldstrike property slip through the fingers in the mid-90s.

And if you look at the size of that deposit it would equal half of Newmont's reserves today. So that one discovery had a big impact. And we also have the infrastructure already in place, the roads, the airport and the mill. So basically to increase your land position is a really incremental cost.

So we are quite active talking to institutional investors and we believe we are probably the only junior exploration company in Nevada that is relevant for institutional investors and I say that because you look at our trading volume versus all the other major junior explorers in Nevada, and we are 3.5 times their volume combined. We are probably the only one relevant for an institution of any size, and I would say that if you look at our shareholder list, most of the large shareholders are significant institutions, whether it be Fidelity at Boston or a [few at Toronto].

Now, I want to spend some time just very quickly talking about the people aspect, because in a junior exploration company the people are usually its most significant asset. As I mentioned earlier, Ron McEwen, who is Chairman and CEO of this company, led Goldcorp for 18 years. During the time he restructured the company; until the time he left it had a compound annual growth rate of over 31%, most of the time the gold price was going down.

Michael Milton, back in the 80s he set a very good example of the importance of people. He will ask his audience to think back 40 years and he would say, well I am going to give you three types of real estate investments. One is a small island off the coast of China. It had just been devastated by war and has no natural resources.

The second option, is those small islands off the coast of China, no natural resources, bad weather, and most of [the roads which] didn’t exist. The third option he'd give people was a country that had a tremendous amount of natural resource, great weather, a 2,000 mile border with the United States, and a lot of land around the Pacific and Atlantic Ocean.

So, he asked people what would be the good investment for real estate at that time? People would probably take the latter, but the three countries were Japan, Taiwan and Mexico. It wasn’t the assets that made Japan and Taiwan great, it was the people and as an exploration company, I believe that applies directly to us.

Through US Gold we are trying to bring back the owner-manager philosophy. Rob McEwen is the large shareholder of the company. He owns 19% of the shares. They currently have a market value of over $120 million. He has no salary, he has no stock options; the only way that he can be compensated is through a higher share price. I am asking you to look at the junior sector and see where you can find that; you will not see it.

So I just want to conclude by saying that, if you are interested in the junior sector, there are a lot of companies that are trying to find gold all over the world, but if you are in South America or in certain parts of Europe, you will find there are title issues, there are security issues, there are labor issues and a lot of the policies have swung to the left. It now takes between three to five years to put a mine into production, from $0.25 billion to $2 billion; and if you look at Bolivia, you look at Mongolia, you look at Venezuela, the governments that are coming in, they have taken the properties, they are putting excess tax, because they say, “Well, we have noticed the deposits were quite so big, so maybe you shouldn’t have all of it.”

Last year you had the President of Bolivia say that he was the United States’ worst nightmare. And you have to wonder if you are dealing with an investment or you are dealing with a ticking time bomb. And I know there are some companies that have their mine operations in Bolivia, but it’s not where I would want to be. For US Gold, we try to create a package that will be attractive to investors. All too often you have a junior exploration company that’s not focused, they are underfinanced, and the CEOs are selling off stock. That’s not the case for US Gold, and so we have gone out there and we have put our beliefs into this company; it’s what an explorations firm should look like.

We trade on the American and Toronto Stock Exchanges. We have 93 million shares outstanding, 109 fully diluted, we trade about a half million shares a day. We have a 52 week high and low of $7.50 down to $3.70, and our current share price US $6.50 a share, giving us a market capital of about US $600 million.

That concludes the US Gold presentation. I want to thank everybody for their time. I would be happy to answer any questions that you may have. Yes.

SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

1178 Views